Clydesdale Yorkshire Bank Group (CYBG) has agreed to buy Virgin Money for £1.7 billion, with the group’s retail customers set to move to Virgin Money over the next three years.

The deal will create the UK’s sixth-largest bank, with around six million customers. CYBG has agreed with Virgin Group to license the Virgin Money brand for £12 million a year, later rising to £15 million.

Under terms published today, Virgin Money shareholders will get 1.2125 new CYBG shares for every Virgin Money share they hold, and will end up owning about 38 per cent of the combined business.

CYBG stated the combined group would have about 9,500 employees, but it intended to reduce that total by about a sixth, suggesting about 1,500 jobs would be lost “via natural attrition”.

The CYBG directors said the combined group will be a “leading force in the Open Banking environment, disrupting the status quo” and generating £120 million of annual pre-tax cost synergies by the end of the 2021 financial year.

Following completion of the offer, CYBG chairman Jim Pettigrew, chief executive David Duffy, and chief financial officer Ian Smith, will retain their current positions. Virgin Money chief executive Jayne-Anne Gadhia has agreed to support the combined group as a senior adviser to the chief executive for a period of time beyond completion.

Duffy commented: “The combination of CYBG and Virgin Money will create the first true national competitor to the status quo in UK banking, offering a genuine alternative for consumers and small businesses.

“By combining two of the UK’s leading challenger banks, we will create a national, full-service bank with the capabilities needed to compete effectively with the large incumbent banks,” he added.

Gadhia agreed that the combination will have greater scale to challenge the big banks. “It will also accelerate the delivery of our strategic objectives, particularly the expansion of the products we offer to customers.”

Share Story: